OP ED: From Safety Net to Trap Net

May 2, 2020

How snags in COVID-19 programs will block people from working even after lockdown ends

Pierre Poilievre is Conservative finance critic.

The government’s $146 billion COVID-19 rescue programs rightly help blameless and suffering people. There is no question that the rescue package is necessary. Government has shutdown businesses and workers, so it must replace their incomes. The problem is that these programs are designed to keep the economy shutdown—even after public health officials declare it safe to open.

Here’s how.

Let’s say you are a worker whose employer had to reduce your hours because his revenue dropped due to COVID-19. The only way you could qualify for the $2,000 Canada Emergency Response Benefit (CERB) is to “have stopped working because of COVID-19,” says the government’s website. So, you had to turn down all employment, even the few hours a day your boss could afford to offer.

That was only the beginning. Once you qualified for the CERB, you face new anti-work penalties. Your boss calls and says he can hire you back part time, paying you $1,100 a month. But the government will cut you off the CERB if you earn more than $1,000/month. That is only eight days of employment per month at minimum wage. So, if you work nine days and make just over $1,000, you lose $2,000. That is an effective tax rate of 200%. No one can afford to lose $2 for every $1 they earn.

Let’s say your son is a student. He faces the same hardship. He will lose the $1,250 Emergency Student Benefit, once he earns more than $1,000—an effective tax rate of 125%. Effectively banned from working, your son is stuck trying to fund tuition with the trifling government assistance.

Let’s say your wife has a business. She too must suppress her earnings to get government help. To get a wage subsidy, her revenue must be down 30% and to get rent relief, she must be down 70%.

One small Ottawa grocer contacted my office to tell me that even though his business is essential, federal programs are now punishing him for having stayed open to serve his customers and employ his workers. You see, his revenue is only down 50%, not the 70% needed to qualify for help with rent. Had he closed up shop and brought his revenue to $0, he would have qualified for rental support. The only way to drop his revenue enough to get government rental assistance in May and June will be to close. That will hurt his customers and workers, and mean he pays less tax to the government. But he can’t afford his rent without the subsidy. And he can’t get the subsidy unless he closes.

He’s not alone.

And this is where the economics get really haywire: some provinces are now planning to open the economy as early as May. But rent and wage subsidies continue until June, the Student Benefit until August and the CERB until October. That means you, your wife and your son must reduce your earnings well after the lockdown ends, just to get the help you need.

You are not gaming the system. You are just trying to survive. Your wife’s cash-starved business needs the rent subsidies to afford to open her doors. She will lose that help if her revenues even rise to one-third of previous levels (not even close to what she needs to be profitable). There are thousands of business owners making exactly this calculation.

Not to mention the 7.2 million workers (many below the poverty line) on the CERB who will be justifiably afraid to lose their benefit. Before condemning them, put yourself in their shoes: you are being asked to return to a shaky job that you could lose if the COVID-19 lockdown returns or if your struggling employer closes shop because of a collapsing economy. If you earn $1,001, your $2,000 CERB benefit is gone. If you then lose your job, you have nothing.

The government promised to hold you up. But is now holding you down.

To free people from this snag, Parliament must fix these needed programs, so people have a safety net and not a trap net.